Brazil's inflation expectations slide to new lows

Brazilian inflation expectations for this year have fallen to fresh lows, according to a central bank survey of economists.

LatAm Roberto Campos Neto

The central bank's president, Roberto Campos Neto, said last week that inflation is well-contained and on a downward path, giving policymakers space to further reduce the benchmark Selic interest rate, which was cut to a fresh low of 6.00% in July.

The central bank's latest weekly 'FOCUS' survey of around 100 financial market participants published on Monday showed the average 2019 inflation forecast fell to 3.59% from 3.65% the week before.

That was the fourth weekly downward revision in a row and is the lowest projection so far this year, moving further away from the central bank's official forecast of 4.25%.

For the third week in a row, FOCUS survey participants expect the central bank to reduce the Selic rate to 5.00% by the end of the year. The bank's policymaking committee, known as Copom, will deliver its next rate decision on Sept. 18.

Market participants continue to lower their outlook for the Brazilian real's exchange rate against the dollar. Economists raised their average year-end dollar forecast for the third week in a row to 3.85 reais from 3.80 reais the week before. ■